Rank: Elder Joined: 9/25/2009 Posts: 4,534 Location: Windhoek/Nairobbery
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mv_ufanisi wrote:Horton wrote:Poorly written article.
1. House prices in the West are "cheap"
that's none sense. He is comparing Commuter areas in London eg Sussex to prices in Westlands, which is more or less, CBD. If we were to compare potatoes to potatoes, then in London, Knighstbridge specifically, a 2Br flat is £1.95M compared to Westlands where a 4br flat is 20-25M with all facilities. In South Africa, Joberg specifically, a 2 Br flat in Sandton, is about 10m rand. If he wants compare commuter areas, he should compare Sussex to Ruiru where a nice 3Br house,is in £300k mark and ruiru is at Kes 6m.
2. What led to the downfall of the housing markets in the west a few years ago was mortgage defaults. In the west, the mortgages given were for upto 20% more than the value of houses ie 120% mortgages. In kenya, we have a big shortage of houses in urban areas and a fraction of 1% in mortgages. The rest are cash buyers.
3. As a comedian once said, " Kenya is in Puberty while the west is on menopause" I believe he might have been referring to the economy. The west are mature economies whereas ours are still growing.
4. If your house is 1M and in a year, it's 1.15M is that really "exponential growth" or is that just keeping up with the high frontier inflation? In dollar terms, the increase in property prices isn't as large as he makes it out to be on a longer spectrum.
5. Buy-to-let in Kenya is very consistently holding 5% on current values. Whereas in The west, these metrics hold for a measly 3% net. Pointing to overvaluation on those parts of the world. There are obviously exceptions especially on the foreclosure properties but there luck is more involved than anything else
I know for a fact that a two bed apartment in sandton is not ten million rand but more like one million to two million rand. Check www.privateproperty.co.za to see how much much more value you get from buying in SA than Kenya.
The real estate in Kenya being over priced is primarily a function of a dysfunctional govt and poor planning. The govt would have built roads,wAter and sanitation facilities in target areas and then invited citizens to buy land lots within them. Given that this is Kenya this won't happen.
If the bubble bursts it won't be because of lack of credit but because of a glut (excess supply) and perhaps the inability of renters to afford overpriced rents and of property owners being unable to realize their investment value through renting or selling housing units.
The more concerning problem to me is slummification. A large part of the city will be living in slums because the govt can't get its act together and we have already seen this in places like Umoja and the like. The slum evils of violence and such are perhaps the stuff we should be getting more worried about as they thrive under slum like conditions. The govt needs to urgently take on this problem by pending up new areas where people an afford to live in dignity by building infra and inviting residents to buy and develop their homes. Otherwise we are building the seeds for a very unequal society. Lagos has already gone down this route.
@Mv you are spot on.
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